Scenes from a recession Economist on lessons learned from fiscal cliffhanger
Instead of lamenting Bermudas economic situation, let us learn from it, is the message from Bermuda College lecturer Craig Simmons.
Mr Simmons will speak at the Bermuda College Liberal Arts Fall Colloquium on Thursday on the topic of Lessons Learned from the Recession. He is an economist who teaches at the freshman and sophomore level at the Bermuda College, and he has been a consultant for the Energy Commission and been a part of the Sustainable Development Round Table.
We should have learned a lot of these lessons before the recession, but like most lessons there is a time, said Mr Simmons. Someone once said when the student is ready the teacher will appear. I dont think Bermudians were ready to hear the lessons in 2006 and 2007. They were too busy having a good time living off of debt. Part of my message in the colloquium, is that debt is bad and we need to do a better job of managing our debt. I am talking about private debt. I dont plan on spending a lot of time dealing with public debt primarily because the size of private debt is five times that of public debt. If anything has the ability to bring down or destabilise the economy it is the size of our private debt. I would to focus on the human behaviours.
He said layaway plans where customers select an item in the store, pay for it gradually, then walk out of the store with it, went out of fashion over the last ten years; but they are making a come back.
We are understanding that how we got into this mess was our over consumption of debt, he said. I think the student is ready to learn. I think a lot of people are asking themselves where did we go wrong?. Everyone wants to blame someone else.
Mr Simmons said he did think some of the blame rested on bankers and lending practices, but he wanted his talk to be more about solutions than blame.
I would liken the present recession to the 1988 to 1992 recession, he said. Both were created by a financial crisis. The 1988 recession was created by local banks cutting off credit. It was a local credit crunch. The present recession was precipitated by foreign banks cutting off credit and local banks following suit. In that sense they were both precipitated by a credit crunch. The recovery from that kind of recession tends to be slower. We had a bit of a downturn in 2001 after 9-11. In the United States it lasted just a couple of months. In Bermuda it resulted in our growth falling, but not enough to be labelled a recession.
He shied away from saying outright that Bermuda is going through an economic depression.
People ask me in the grocery store if we are going through a recession, he said. Economists dont like to say that. I dont want to be the first economist to say that we are, but it smells like one, barks like one and looks like one.
The recession, and whose fault it is, has become one of the monster sticking points in the current election. Mr Simmons said there are two viewpoints. One viewpoint is that the recession is almost entirely locally created, and the other viewpoint is that the recession is something almost entirely created by outside forces.
The truth usually lies in between, he said. I cant say which percentage was locally produced and what percentage was created by our neighbours to the east and west but I get the sense that most of it is coming from the outside. Even the United States economics woes hinge on whether or not the Europeans can sort out their financial mess. So even the Americans have limited control over their economic future. We live in a global economy that is an interconnected beast. What goes on in other parts of the world matters.
Mr Simmons felt the lesson from this was that we needed to create an economy that was better insulated against outside shocks and bumps.
We in Bermuda need to get better at managing the interface between the domestic economy and the overseas economy, he said.
Mr Simmons said he was inspired to go into economics by an economics professor at the Bermuda College, Trevor Line.
I told him that I was going away to study economics to put him out of a job, as he was a non-Bermudian, said Mr Simmons. He wrote my recommendation for me. I was young and foolish and he knew that.
The lecture is on Thursday at the Bermuda College in Hallett Hall, Lecture Theatre, H100 at 7pm. For more information contact Craig Simmons at 236-9000 ext 4237 or e-mail firstname.lastname@example.org or see www.college.bm.
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